Should there be a mandatory register of beneficial ownership of corporate structures in every country?

Simply put, no, there should not be a mandatory register of beneficial ownership of corporate structures in every country.

I understand that this sounds contradictory because, after all, Jersey has had a central register in place since 1989, and by law, trust and company service providers (TCSPs) must provide full details of beneficial ownership and control on incorporation to the Jersey Financial Services Commission (JFSC).

And yes, we even adhere to international standards on beneficial ownership – widely accepted to be set by the Financial Action Task Force (FATF). Also, for the last 30 years Jersey has shared information on beneficial ownership with authorities such as the National Crime Agency.

So, if we’re already ‘following the rules’, why wouldn’t we want a mandatory register of beneficial ownership of corporate structures in every country?

Our opposition to central registries is based on academic research on the value they provide in achieving corporate transparency and deterring financial crime.

Cambridge University Professor of International Relations, Professor Jason Sharman found that:

“It is simply not possible to say that centralised registries work better than the leading alternative, and it is demonstrably wrong to say that they are the only way of achieving corporate transparency. A beneficial ownership regime based on licensed corporate service providers (CSPs) is a better solution…CSPs have an incentive to ensure records are accurate in that false records may lead to a revocation of their licence.”

Although the ‘Jersey Model’ is a market leader in terms of its approach to handling beneficial ownership information, endorsed by authorities including the OECD, the World Bank and MONEYVAL, we would argue that public registers are not the most effective way to deter financial crime.

Why? Because public registries are typically passive; they perform an archival function, not an investigative or enforcement role. To be effective and deter criminal activity, the information on a registry must be verified, accurate and timely.

As an example, Companies House in the UK does not verify information provided in annual returns or incorporation documents; it is simply a repository of information rather than a regulator.

However, the current requirement of the European Directive, or Fourth Anti-Money Laundering Directive (4MLD), requires Member States to establish a central register of beneficial ownership information.

So which standard or process helps prevent criminal activity?

Some suggest that public scrutiny of a register would help prevent criminal activity.

The UK Government in 2013 proposed improvements to transparency of beneficial ownership and prepared to tackle tax evasion, money laundering and terrorist financing by making public a register of company beneficial ownership, or a public register of persons with significant control (PSC). Jersey’s response to this proposal was clear: registers holding information on beneficial ownership should not be made public.

Jersey’s view remains unchanged. In fact, this is a shared view with the European Data Protection Supervisor (EDPS) who believes beneficial ownership information should only be available to entities “in charge of enforcing the law” due to the significant unnecessary risks for individuals’ rights to privacy and data protection.

Privacy is another fundamental issue when thinking about public registers. Public registers risk overlapping between disclosing information in the public interest and information which interests the public, potentially with grave consequences.

It is notable that in October 2016, the French Supreme Court published a decision challenging the legality of the government’s public register of trusts. In December, the same court declared the public aspect of country-by-country reporting as unconstitutional. Does this demonstrate an international trend against making this information publicly available?

There are alternative ways by which the same ends can be met without the violation of human rights; the Jersey model is a leading example of this.

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